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Public-Private Earnings Differentials during Economic Transition in Hungary

Author

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  • Jelena Lauçev

    () (University of Nottingham, School of Economics, University of Belgrade, Faculty of Economics)

Abstract

The paper explores the effect of economic transition on public-private sector pay differential across the pay distribution in Hungary from 1992 until 2003. Over the time period covered by the analysis the public sector had witnessed large-scale privatisations and restructuring through a number of wage reforms. The paper finds that both men and women in the public sector fared significantly worse than their private sector counterparts during 1990s, but this penalty declined to almost zero until 2003. The results from quantile regressions verified that the public sector pay distribution was more compressed than in the private sector and hence workers at and above the median fared significantly worse off having a public sector status even by the end of the period considered. These results are futher reinforced by the method of decomposition of differences in distributions. Moreover, the paper examines public sector pay penalties/premia for different skilled groups of workers. These results show that the public sector within-group earnings equalising effect for male graduates in Hungary was three times greater than the similar estimate reported by studies in developed market economies.

Suggested Citation

  • Jelena Lauçev, 2012. "Public-Private Earnings Differentials during Economic Transition in Hungary," Budapest Working Papers on the Labour Market 1202, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  • Handle: RePEc:has:bworkp:1202
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    References listed on IDEAS

    as
    1. Branko Jovanovic & Michael M. Lokshin, 2004. "Wage Differentials between the State and Private Sectors in Moscow," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 50(1), pages 107-123, March.
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    3. Gabor Kertesi & Janos Kollo, 2000. "Wage Inequality in East-Central Europe," Budapest Working Papers on the Labour Market 0007, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
    4. J. DavidBrown & JohnS. Earle & Álmos Telegdy, 2010. "Employment and Wage Effects of Privatisation: Evidence from Hungary, Romania, Russia and Ukraine," Economic Journal, Royal Economic Society, vol. 120(545), pages 683-708, June.
    5. Kertesi, Gabor & Köll?, János, 2003. "Fighting “Low Equilibria” by Doubling the Minimum Wage? Hungary’s Experiment," IZA Discussion Papers 970, Institute for the Study of Labor (IZA).
    6. Keane, Michael P. & Prasad, Eswar S., 2006. "Changes in the structure of earnings during the Polish transition," Journal of Development Economics, Elsevier, vol. 80(2), pages 389-427, August.
    7. Richard Disney & Amanda Gosling, 1998. "Does it pay to work in the public sector?," Fiscal Studies, Institute for Fiscal Studies, vol. 19(4), pages 347-374, November.
    8. Stephen Nickell & Glenda Quintini, 2002. "The Consequences of The Decline in Public Sector Pay in Britain: A Little Bit of Evidence," Economic Journal, Royal Economic Society, vol. 112(477), pages 107-118, February.
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    More about this item

    Keywords

    wages; public sector; Hungary;

    JEL classification:

    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets

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